How to Break Into Venture Capital

“I’m an engineer with a 3.6 GPA at a top university. I have a full-time investment banking offer lined up at Credit Suisse, and I’ll be working in their tech M&A group. Do you think I can I break into venture capital?”

While venture capital receives less attention than private equity and hedge funds, I’ve gotten many, many VC-related questions over the years.

Q: Can you tell us about your background and how you got into finance in the first place?

A: Sure. I studied engineering at a top university in the US – I wasn’t sure what I wanted to do afterward, so I applied to Master’s programs and took a combination of math, finance, and engineering classes once I got into my top choice.

Since it was a target school and the market was much better back then, banks and consulting firms came to recruit at my school and I interviewed for everything from engineering jobs at companies like Google to consulting and finance positions.

Ultimately I had become more interested in business, so I went to a well-known tech banking group.

Did you know you wanted to get into the industry in the beginning, when you first started out in banking?

A: No, I barely knew anything about the buy-side and exit opportunities in the beginning. At bulge bracket banks you get exposed to this early on because headhunters start calling you 6 months into your time on the job, but at smaller and regional places you don’t get as much exposure.

By the time I started thinking about exit opportunities, I had been working for a few years and had already been promoted to Associate – so I didn’t want to leave right away.

After I had been an Associate awhile I started looking more seriously at buy-side job postings on sites like Glocap and I began to contact headhunters in my area, but at that point I still wasn’t set on VC.

Q: You mentioned job posting sites and headhunters – don’t you have to network a lot to break into VC?

I always thought that networking was even more important there because the firms are so small and they have less money to spend on recruiting compared PE firms or banks.

But a lot of it depends on what type of firm you want to work at. The biggest and most well-known VC firms – think Sequoia – use headhunters, as do many late-stage VCs. The smaller the firm and the less capital they manage, the less likely they are to use headhunters.

I didn’t network that much because I had a brand-name school on my resume, I was already in banking, and I was aiming for late-stage funds that actually used headhunters.

Operating Partner: You’ve been a VP of Sales at Oracle or another tech company for 10 years, and you’ve had a lot of success and risen to a senior level. Your boss or another colleague knows a VC, and you get a referral like that.

Of these methods, #3 is the most difficult to use when breaking in because you actually have to be successful in the real world.

At the pre-MBA level, they like bankers with good deal experience or anyone with product management / business development experience at tech companies because you have a lot of insight into how companies operate.

Consulting backgrounds are also good, but some are more helpful than others – advising tech companies on strategic partnerships is a lot more relevant than doing HR consulting, for example.

At the post-MBA level you see people with a wider variety of backgrounds getting in – you just need to go to a top school and have access to recruiting channels there.

Pedigree also matters quite a bit – not so much in terms of the specific bank you worked at, but more so with the university or business school you attended. VC firms are very traditional and they get tons of resumes, so they like to take the path of least resistance and filter by school name.

Stuff Venture Capitalists Like

Q: Interesting. I guess it’s unlike private equity, where you pretty much need to have been an investment banking analyst before breaking in at the post-MBA level.

We’ve talked about the entry points and what recruiters look for, but what about venture capitalists themselves? What characteristics do they look for in recruits?

A: It depends on what type of VC firm you’re applying to – Early stage? Late stage? – and what the firm’s focus is – Sourcing? Due diligence? Portfolio company work?

Each firm focuses on different things, so they look for different qualities in recruits. Let’s take a firm that’s very heavy on sourcing – an example would be Summit Partners, where you do a lot of cold-calling as an Associate.

A firm like that would assess how presentable you are in front of a CEO, how articulate you are, and how confident you are in making presentations and talking to people. In an interview, they might even ask you to make an impromptu presentation to them.

So those types of firms expect you to know a lot about coordinating lawyers, accountants, and bankers, analyzing a company’s financial statements and creating financial models – similar to investment banking.

Early stage firms place more of an emphasis on sourcing, market sizing, and investment thesis development – e.g., how many people will adopt Mobile TV? When will it hit the “tipping point?”

Interviews at those places are very subjective and consist of chatting about the industry, recent trends, and companies you’re interested in.

Finally, some firms focus more on working with portfolio companies – they’re not as common as late-stage or early-stage VC firms, but they do exist.

They’re more interested in people with strong operating backgrounds and anyone who has experience creating and managing products, developing partnerships, marketing to customers, and so on.

IB Interview Guide

Q: Wow, I didn’t realize there was so much variety just within venture capital. Most people just think of trying to find the next Twitter or Facebook when you talk about VC, but there’s a lot more to it than that.

You mentioned what types of people different VC firms prefer to recruit, but is there anything that all firms really like to see? Any common mistakes that recruits make when pitching themselves to VCs?

A: I’d say the biggest point is having a strong opinion on a given company or industry. Lots of people walk into interviews and just casually chat about the tech industry without expressing a specific opinion.

That’s fine if you’re an investment banker, but on the buy-side you’re making investment decisions and you need to be very opinionated about what industry is going to take off and what companies you should invest in.

You need to be ready to go in there and say, “XX is awesome because of points #1-6, and they’re going to be huge in 5 years – we should invest in them.”

The other mistake a lot of people make is focusing too much on a company’s products rather than its market position and how it stacks up against the competition. Even though VCs invest in technical companies, investing itself is still a business decision driven by the market rather than technical product details.

What’s important to emphasize on your resume or CV when applying to venture capital jobs?

A: You don’t want to seem like you’re a hedge fund, PE, or quantitative finance guy or girl – they want people who are interested in startups and technology.

Deal experience is fine to list but you want to focus more on how you worked with CEOs and other executives and the market sizing / business development work you did.

They don’t want to look at your resume and see tons of numbers and obscure acronyms everywhere.

In the Interests section, you want to list items that are related to technology (or bio-tech / clean-tech if you’re applying to those types of VC firms).

VCs would rather have presentable people with a passion for technology than number crunchers with no interest in startups.

Q: Ah, ok. So if you’re applying to VC jobs, you can use the deal experience resume template but you might have to modify your descriptions a bit. What about the interview process for VC firms – how is it different from investment banking and private equity?

A: It’s very informal. They’ll say, “Come in for lunch and let’s chat. We’ll see who’s around and they can sit down and meet with you.”

Q: So I’m guessing you never received modeling tests during the recruiting process?

A: Nope. Even at late-stage firms I didn’t get modeling tests – though again, if you move closer to the private equity side of the spectrum they might be more common.

One other point I would raise: we’ve mostly spoken about VC firms that invest in technology companies.

But if you go to one that does bio-tech, healthcare, or clean-tech investments, you may get more detailed technical questions on the technology itself – they may ask you about fuel cells or different types of solar panels, for example.

Final Thoughts

Q: Great. I just have a few more random / miscellaneous questions that we haven’t gotten to yet.

A: Either do investment banking or consulting first, or get an MBA from a top school. There are just too many other engineers who want to do venture capital and you won’t stand out unless you have some kind of “validation.”

I have a few friends who didn’t even do banking or consulting before business school but who are now going to VC firms – just because they got an MBA from a top school.

Some people argue that you have to have been a successful entrepreneur or operator to be a good VC – do you think that’s true?

A: No. The VC industry – just like investment banking or private equity – has many artificial barriers to entry, but in reality lots of people could do the job.

If you look at one of the top VCs in the world – Mike Moritz at Sequoia – he was a journalist at Time before getting into the industry.

He’s an outlier, of course, but I’ve seen lots of data showing that there is no correlation between operating experience and being a good investor.

It’s a “gut feeling” type of business, and having experience starting companies doesn’t mean you’ll be great at investing in companies.

Q: Another common argument is that you need a lot of connections to break into VC, because they want people who can tap their networks to find great companies.

If you look at the websites of some VC firms, the Associates seem to fall into that category – they’ve worked in a certain industry for a number of years and have a huge Rolodex. How important do you think connections are?

A: I don’t think it’s that important at the junior level.

Most firms don’t expect you to come in as a former investment banking analyst with a huge Rolodex – connections are more important if you’re moving in at a more senior level or you’re going to a “premium” firm like Sequoia or Kleiner Perkins where they want people who can hit the ground running.

Q: Awesome, thanks for your time. We could keep going but this is already quite long, so let’s pick up with part 2 next time.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Comments

I have been a consultant at McKinsey for more than 2 years now and have a Masters in Finance from MIT Sloan School of Management. I studied Mathematics and Quantitative Economics in undergrad. I’m looking to break into product management before I go the VC route or might exit directly into VC. Regardless, I was a little discouraged to see that you need an MBA to be on the partner track at a VC. Is that a rigid requirement? How strictly is this followed and are there ways around it? Given my Masters degree was offered within MIT’s business school and had a huge overlap with MBA, is there any room to showcase that as a replacement for MBA?

I don’t think that’s a rigid requirement, but it is pretty common among Partners at many VC firms. VC recruiting really comes down to market knowledge and ability to source deals… so if you have the right network and can bring in and evaluate start-ups, degree doesn’t necessarily matter.

Hi – I’ve been doing informational interviews with a few VCs recently, and sometimes, the VC asks me why I am interested in VC as opposed to PE. Any suggestions on what could be a good answer for this question? Thanks!

Great article as always. I was wondering if you had any estimates on compensation (would be great if you could break it into base + bonus + carry) at the different levels of hierarchy within VC. I understand this could vary based on the size of the fund, stage of investing that the fund participates in etc., but any rough numbers would be super helpful.

As a follow up, do you know of any other websites that track VC compensation? This link compares the compensation for “CVC Unit Leader” with a person in regular (non-corporate) VC, so I’m assuming the regular-VC compensation is for a Partner level VC. I was looking for Associate/Principal level compensation. Anything else you could point to, even if directional and not hard numbers, would be super helpful!

Hi Brian,
I am a Computer Science grad from a top-5 university worldwide, with a bad gpa (2.7) but a rather decent experience. Worked as a Software Engineer with a Fortune 1000 company for 3.5 years, then started my tech venture in India in social-commerce which failed to raise funds. I am currently managing my family’s Commercial-Real Estate investments business in New Delhi which has done fairly well. I understand the tech-space well and want to get into anything related to investing in companies with a tech-focus.

1) Do I stand a chance of getting a pre-MBA VC associate position with that kind of background?
2) Considering that UGPA and a mediocre GMAT score of 680, getting into a top MBA program seems improbable to me, at least in the US. What among MS in Finance / Entrepreneurship / MBA from a top 10 in Europe, would maximize my chances to break into VC?

You might have a shot, but in India it’s difficult because the industry is so small there (relative to the population). You would have a better chance in a bigger market for VC, such as the U.S. or Europe. Yes, I think a top Master’s degree in another region is probably your best chance. You might actually get into a top MBA with a low GPA, but you probably have a better chance at MSF programs.

Perhaps it is just an American thing (I am based in Europe), but you can indeed break into venture capital with a science background and not have an MBA or investment banking experience. However you better have essentially the equivalent of MBA knowledge to some degree; this could include a combination of starting your own business, taking courses in finance/economics, doing some marketing work, interning at places where you get client exposure and doing mini-MBA programs. Also that science background should obviously be a Ph.D from a top school.

Hi Brian:
Really love some the answers of this article. I am wondering if i had an Economics BA degree during the undergrad, and have two years working expereicne in the secondary market. I;m very interested in tech innovations and venture capital. Do you think a further MS degree in business or finance will help me to get into this area? Or there are some schools offer a degree in entrepreneurship. Do you think those may help? Thanks a lot!

The only degree that really helps for venture capital is an MBA. An MS might help a bit, but generally they want people with tech or finance experience (working on deals). I wouldn’t bother with an entrepreneurship degree. You need to gain more relevant work experience (something related to advising tech companies, doing product management at a tech company, etc.).

I am a sophomore right now at a target school, studying Business Administration and Computer Science. Since freshman year, I’ve been first employee at a startup founded by another student. We haven’t achieved as many sales as we’ve liked, but currently we’re in the process of acquisition. Through working with this startup, I’ve helped raise money, I’ve networked well, I’ve learned how to close sales, and many other startup related lessons.

I’m now looking for a summer internship/job. I’m not good enough at CS to do Software Engineering, nor do I really like programming really. I’ve had a few offers from similar startups in similar Business Dev/Product/Sales roles as the one I am in now.. but tbh after being in the “startup community” for these past two years I’m kind of jaded and don’t want to go down that route.

I was thinking of applying for an IB internship for this summer, but I honestly don’t know shit about IB. Hopefully I can read your guide fast enough..

However, while reading the Banker Blueprint, I thought “why not look into VC”? I have wayyyyy more contacts in the startup community than in the finance community. I was the first employee at a startup that is going to get acquired. And I am also technical (Computer Science). Most importantly I would rather be a VC than an IB.

Thoughts? Let me know if there are any flaws with my logic.. apologize if I said something stupid I’m typing this at 4 am.

i applied to VC firms and got some decent responses. one asked me to send them a deck of a fintech startup i am interested in/have been researching.

I’ve pitched investors before to raise money for my own startup, but I’ve never made a deck from the perspective of a venture capitalist. do you know of any pitch templates that i can use?

Also, just in general, do real VC’s pitch the firm partners with companies they think that the firm should invest in? Or do VC firms just use pitch decks provided by the entrepreneurs/startups? Thanks for the help.

There are plenty of investment recommendation examples on this site, so please do a search and refer to these. Internally, VCs do not rely on marketing materials sent by startups. They have their own debates and prepare their own investment memos.

Networking might work at smaller firms, but to move to a brand-name VC firm (a16z, KPCB, Sequoia, Accel, etc.), you would need more brand-name recognition (probably also true for smaller funds). Maybe find a fund that’s looking for an “Entrepreneur in Residence” or something similar.

First off have to say this is a great article, very informative and helpful. I am highly interested in early stage Venture Capital and have around 8 years of experience working in business development roles (Direct, Consultative, Enterprise) in the cross roads of finance and technology. I have worked for a leading market data provider, the technology arm of an asset manager as well as a financial communications startup. I have also invested in a few tech startups. I did the grad-scheme / blue-chip thing but now I really want to try turning my hand to working with smaller companies to help them grow and succeed. I am considering the best way to get into the early stage VC industry preferably without going the MBA route. Do early stage VCs value my type of experience? Any advice in breaking in would be truly welcomed.

Yes, they value your type of experience, but it’s still quite tough to get into early-stage VC in a junior role because there’s less modeling/due diligence-type work. To have a good shot, you would have to network heavily, go beyond traditional VC firms and also consider accelerators and seed funding programs, and if that doesn’t work, think about the MBA route instead. You may also want to go beyond early-stage firms and consider growth equity and later-stage ones.

Sure, you can do it, but you’ll need to spin some kind of good story about how you’re really interested in technology… so you’ll probably need to point to outside activities, past or present, to do that. Industry/product background at a bank matters less than people think, with some exceptions (e.g., it’s easy to get pigeonholed coming from FIG).

Was recently promoted to associate from analyst as part of a BB LevFin group. Would it be feasible for me to break into VC with this kind of background? I know LevFin isn’t the most applicable group but I have pretty much ruled out seeking HF and LBO PE firms at this point.

Sure, you can do it, but you’ll need to spin some kind of good story about how you’re really interested in technology… so you’ll probably need to point to outside activities, past or present, to do that.

I’m currently a hospital administrator with about ten years of leadership experience. I’m considering a career change so as to further my passion for improving healthcare. I do not know anything about venture capital, but I do know I want to help companies achieve their goals so I can achieve my goal of improving the cost, quality, and access to healthcare. Without knowing more about me, would you say I would be valuable to a VC firm dedicated to healthcare? If so, what firms would you suggest I research and apply to?

I am about to apply to an MBA in a couple of top 30 business schools. Pre MBA iv got 4years audit/accounting experience but I eventually want to be in VC post MBA. My tentative plan is to get an MBA, do about 2yrs buy side investment banking and then make the move to VC. This is because looking at a lot of schools employment stats, VCs dont really recruit a lot of students not to talk of international students like me. Do you think my strategy is a good one? please advise.

Potentially, yes, but it’s not that easy to move into VC from IB coming from a post-MBA role there. You could do it, but it’s probably easier to move into VC directly after business school, especially since most skills you gain in IB are unrelated.

Hey Brian, thanks a lot. Ive done a lot of research and figured the chances of getting into VC are too slim especially if its not a top 5 MBA. Tilting more towards oil and gas investment banking since im coming from an oil and gas background (oil and gas audit)….i hear texas austin and rice are the top 2 schools to go to if i want that career path.whats your take on this please? Must i go to a school in houston because im tilted more towards DC or NewYork.thanks

My background starts at Business Administration and I plan myself to join this industry in the long term when reached 7-8 year experiences in Business Analyst (SQL, VBA, Stats) – which is thought to become valuable to business growth in early stage and late-state as well for crystal reason:

– By working as Business Analyst (BA) in tech firm, I can understand a lot about how business runs and make profit? what’s the pros and cons a new product often needs to be tackled? which steps can be developed to cut cost, lower risks or increase profit of firms & products? which channels should be boosted to speed up sales effectively?

=> Then I definitely have the well-rounded viewpoint of business operation to make right strategic move when needed (from data analytics to business development and product development).The only thing left could not be found here is the valuation skills of finance, then i can take it later via CFA (or something else) to qualify my self better to step into VC career.

– Yes you can learn the ins and outs of new products, and what you mentioned I believe. It does depend on the firm and the description of the role.
– If you want to get into VC, a target MBA and startup experience will help. So you may want to found/being one of the early employees at a startup after the role at the tech firm. And you may find that you don’t want to go into to VC thereafter

So far i got clearly that how much i love the career as VC and definitely keep it pace to be closer my dream. From your points are much helpful to understand why a target MBAs and startup tech experiences are extremely valuable to VC’s profiles. Btw can you give me some suggestions of startup position that suits me to the ground ?

Furthermore i am doing as BA and found out there are tons of things everyday and much diverse in different tasks/projects. Do you give any recommendation of what skills/ fields/ orientation that I have to be very focus on to grow myself firmly ?

I just finished my first year as an analyst at a bulge bracket. I’m not a huge fan of my team and have been considering accepting a fp&a offer at a really interesting tech company. In the long run though, I think I’d like to work in venture capital, so my question is: do you think it would be smarter to take the offer or stick it out for a while at my bank and try and move directly into vc?

If you don’t like your team, I’d join the tech company and see if you can move up the ladder within the company and gain exposure to VCs. And then you maybe able to move to a fund. You may still need to get an MBA or relevant startup experience to get a role at a fund but I think this experience maybe a gateway to that